Now that's wafer thin: Some manufacturers had less than five days of chip supplies, says Uncle Sam

Components fabbed using 40nm-plus process nodes hit hard

Hardware manufacturers hit hardest by the global semiconductor shortage had less than five days of chips in their inventories last year – and should expect supply chain issues to continue throughout 2022 – the US Department of Commerce said this week.

Demand for semiconductors skyrocketed during the pandemic as folks purchased more PCs, laptops, and tablets to work or learn from home, and cloud giants scaled up their backend systems to cope. Supply, however, couldn't keep up. The median inventory of semiconductor buyers in 2019 was 40 days of supply. By 2021 that figure was down to less than five days for certain key US sectors, the department said in a report, while demand was up 17 per cent.

Production was initially slowed at factories around the world due to shelter-at-home orders as the coronavirus pandemic took hold. Some facilities had to temporarily shut down after they were hit with natural disasters, such as fires and snowstorms. But between Q2 2020 and the end of 2021 fabs were operating at over 90 per cent capacity and still couldn't meet global demand.

The Dept of Commerce wanted to find out what was going on, and in September issued an official public Request for Information (RFI). It got more than 150 replies from the industry, including from "nearly every major semiconductor producer," and a lot of comment from the automotive sector. The report has now been published, and the department is positioning it as a call to arms.

"The RFI results make it clear: America needs to produce more semiconductors," the report stated. "Congress must pass funding for domestic semiconductor production, such as the US Innovation and Competition Act, to solve our supply challenges for the long term."

Manufacturing a chip is incredibly complex. It requires all kinds of materials and specialized equipment to produce silicon wafers of ultra-miniaturized electronics. "The primary bottleneck across the board appears to be wafer production capacity," the department noted.

Uncle Sam said it found that the industries hit hardest from the chip shortage were auto, healthcare, and telecommunications.

Buyers looking for microcontrollers from 40nm to 250nm, analog chips from 40nm to 800nm, or optoelectronics chips from 65nm to 180nm were hit particularly hard. Manufacturers, such as Apple and Nvidia, needing state-of-the-art chips at 7nm or smaller for mobile, servers, and personal computing, were also strained. Experts believe the shortage will continue throughout the year.

The Department of Commerce is now looking for expert comment on how to strengthen the chip supply chain within the US. It launched another RFI on Monday to figure out new plans and programs to attract more investment in chip fabs and boost.

"The United States faces both an immediate supply shortage that's driving up prices and a long-term threat to America's economic and national security if we don't increase domestic supply of chips," said Secretary of Commerce Gina Raimondo.

"As demand for semiconductors will only increase, we need smart, strategic investments to shore up our domestic supply chain – and we need it now. Not only to address current shortage and supply chain issues but to help position America to lead globally by investing in our semiconductor manufacturing and R&D and enhance American competitiveness."

She urged Congress to approve the $52bn funding in the CHIPS Act. "This much-needed legislation also has funding to incentivize investments in new semiconductor manufacturing facilities in the US as well as billions to establish a National Semiconductor Technology Center." ®

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